How Hello Kitty helped turn one entrepreneur into a billionaire

Tanya Stanich, a 43-year-old lawyer, clutched a handful of pink and black Hello Kitty notebooks at Sanrio Co.’s store in Manhattan’s Times Square and touched a sequined bag adorned with the face of a cartoon cat.

Growing up in Wisconsin, Stanich was introduced to the white feline, which sports a red bow and no mouth, by a California aunt, who sent her a Hello Kitty lunchbox, stickers, hair clips and pencils. Now a resident of New York’s West Village neighborhood, Stanich says she still buys the stationery to brighten up her life.

“It’s nice to have something a little girly and flashy and fun,” said Stanich, who keeps her iPhone in a Hello Kitty case. “I could go nuts in here.”

Loyal fans like Stanich have helped make Shintaro Tsuji, the 85-year-old founder of Tokyo-based Sanrio, a billionaire. Since introducing Hello Kitty in 1974, Tsuji has captured the hearts and wallets of girls, women and celebrities such as Lady Gaga by licensing the character, which appears as stuffed toys, as well as on airplanes, golf bags and even vibrators.

Sanrio’s shares have doubled this year, more than the 38% gain in Japan’s benchmark Nikkei 225 Stock Average, and reached a 52-week high yesterday. The company, which sells gift cards featuring cartoon characters, operates theme parks and produces and distributes movies, had 74.25 billion yen (US$898.6 million) in sales its last fiscal year ending in March.

“It must be way up there in terms of the most recognized franchises in the world,” said Ted Bestor, director of the Reischauer Institute of Japanese Studies at Harvard University in Cambridge, Massachusetts. “It’s very hard to see any diminution for the Japanese fondness for cuteness.”

Tsuji is president and chief executive officer of Sanrio, while his son Kunihiko, 61, is the company’s chief operating officer and senior executive vice president. The billionaire, who has never appeared on an international wealth ranking, controls 1.8 million shares of Sanrio directly and 18.1 million more through Kunihiko and trusts held by his wife, Yasuko.

Toshifumi Kato, an investor relations official with Sanrio, said Tsuji wasn’t available to comment on his net worth.

The billionaire, who has written company newsletters under the pen name Strawberry King, was born into a wealthy family that ran restaurants and inns in Yamanashi Prefecture, a rural region about 63 miles from Tokyo, according to “Hello Kitty: The Remarkable Story of Sanrio and the Billion Dollar Feline Phenomenon,” a book by journalists Ken Belson and Brian Bremner, which was published in 2003. (Bremner is an assistant managing editor at Bloomberg Businessweek.)

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Tsuji had a lonely, difficult childhood. His mother died when he was 13 and left him with bullying relatives, the book said. He became a bureaucrat, a role he quit at age 33 to become an entrepreneur.

In 1960, Tsuji started Yamanashi Silk Center Co. with 1 million yen in capital, selling silk goods and rubber beach sandals. He introduced his first character, Strawberry, in 1962, pioneering the use of character copyrights, the book said.

The cartoon cat boomed after Tsuji sold his first Hello Kitty product, a coin purse, in 1975, before adults lost interest. It then had a resurgence in the 1990s, standing out from a stable of 450 Sanrio characters, Belson and Bremner wrote. In 2000, fist-fighting mobs thronged McDonald’s Corp.’s fast-food outlets in Singapore to buy dolls of Hello Kitty and her companion, Dear Daniel, dressed in wedding outfits.

“The common thread running through all our various business is the idea of giving ‘from the heart’ and ‘of the heart,’” Tsuji said on the company’s website. “We want to help people share their important feelings with one another.”

Tsuji has reoriented the company toward licensing its intellectual property to companies that make different items based on Sanrio characters, instead of solely focusing on product sales. The strategy has helped the company’s operating profit margin double to 27% over the past four years, according to a July 31 company presentation.

In 2011, deals to feature Hello Kitty on clothes and jewelry sold by Wal-Mart Stores Inc., Inditex SA’s Zara brand and Austrian luxury crystal maker Swarovski helped Sanrio amass 21.1 billion yen in cash, the most in a decade. The company is counting on strong growth in the U.S., Central and Latin America, especially Mexico, and in Asia, Sanrio said on July 31.

Of the 11 analysts that cover Sanrio, five recommend buying the shares, five have “hold” ratings and one suggests the stock be sold, according to data compiled by Bloomberg.

Beyond Kitty

Continuing to create and maintain buzz will allow Hello Kitty, now almost 40-years-old, to stay relevant, according to Christine Yano, chairwoman of the department of anthropology at the University of Hawaii. The cartoon has inspired artists such as Tom Sachs, whose Hello Kitty sculpture stood near Manhattan’s Park Avenue in 2008, and detractors, such as the author of the satirical kittyhell.com blog.

“Part of it is making cute into cool,” Yano, the author of “Pink Globalization: Hello Kitty’s Trek Across the Pacific,” said. “Every time you see the outrageous picture of an MMA wrestler wearing a pink Hello Kitty thong, you have to laugh.”

Sanrio is attempting to diversify beyond Hello Kitty. Two years ago, it bought the rights to the Mr. Men cartoon from Chorion Ltd., the first character the company hasn’t developed internally.

“They’ve ventured into a lot of different kinds of things,” said Tom Looser, who has taught Hello Kitty case studies as an Associate Professor of East Asian Studies at New York University. “Why not start up companies in different worlds? Why not start a theme park while you’re trying to start a restaurant? Part of the risk is that it becomes very hard to manage.”

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